Small Donor Matching Funds: The NYC Election Experience

This report examines the New York City system and shows that a system based on small donations with a multiple match can change the dynamics of money in our politics. Specifically, the small donor multiple match system—which is a feature of both Fair Elections and the New York City system—has the potential to transform our politics by incentivizing and supercharging grassroots fundraising.

Like many public financing systems, the New York City program provides money to candidates who accept expenditure limits and enhanced disclosure. However, the heart of the system, and what sets it apart, is the multiple match—a feature that boosts the impact of small donations by matching up to $175 of each contribution at a six-to-one ratio. By encouraging candidates to engage with voters early in an election campaign, fundraising and voter outreach efforts come together. The report includes a number of interviews with candidates who used the system and testify to its benefits.

Foreword

"[I]t is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country."

A courageous city can do the same. This aptly describes the potential benefit to the country of New York City’s Campaign Finance Act.2

The following Report demonstrates in detail how New York City’s voluntary small-donor matching fund system has benefits beyond simply limiting the size of campaign contributions and expenditures. As I know from first-hand experience, matching small donor donations changes how candidates campaign—in a way that betters democracy. Candidates have a much greater incentive to reach out to ordinary voters, everyday New Yorkers without deep pockets. In turn, being asked to contribute—even small amounts—increases citizen interest and participation in elections.

Based on my personal involvement in the development, defense and implementation of New York City’s matching fund system, I offer a few additional insights.

First, some history. The genesis of reform was a shared conviction that the existing political system was failing and frustrating voters. At the time, in the mid-1980s, the City was shattered by a major corruption scandal. Accompanying the corruption were shockingly large (but legal!) political contributions made to New York City officials under state law. I was then Corporation Counsel for Mayor Edward I. Koch. Koch was himself completely honest, but nonetheless devastated by the scandal and its impact on the City. My advice to the Mayor was to take advantage of the scandal by pressing for governmental reform, including, most importantly, campaign finance reform. To borrow Shakespeare’s words, I urged Mayor Koch to recognize that “sweet are the uses of adversity.”

Mayor Koch did so, and thanks to his efforts, good lawyering by my successor, Peter Zimroth, and the leadership of Peter Vallone, Speaker of the City Council at the time, the landmark City system became law in 1988.

It was passed overwhelmingly in the City Council. It was then enshrined in the City Charter by a very substantial majority voting by referendum—I had the honor to be Co-Chair of the Citizen’s Committee in support.3 Support for the law was bipartisan.

* From 2003 until 2008, Frederick A.O. (“Fritz”) Schwarz, Jr. was Chair of the New York City Campaign Finance Board. Before that, he was the 1988 Co-Chair of the Citizens Committee for support of the City Charter amendment establishing the City’s Campaign Finance Law. As City Corporation Counsel from 1982 through 1986, Mr. Schwarz pushed for radical reform of the City’s campaign finance system. Finally, while in private practice, Mr. Schwarz represented, on a pro bono basis, some forty candidates who intervened against (unsuccessful) efforts to prevent the City from offering a four-to-one match of public funds.

In 1989, at the first election that followed, all three Mayoral candidates, Koch and David Dinkins, both Democrats, and Rudolph Giuliani, a Republican, praised the new system—and participated in it. Since that first election, an overwhelming majority of candidates for all City offices have participated in the program.

Second, a word about the program’s administration. The City Campaign Finance Board (“CFB”) administers the law. A major reason for the CFB’s success is that it has had no partisan divides or partisan stalemates. In this way, the CFB is unlike the Federal Election Commission or the New York State Board of Elections.

In part, the CFB has avoided partisanship because of its appointment structure.4 But far more important have been the traditions established by the first Board members, led by Fordham University President Father Joseph O’Hare as the founding Board chair, and by the first Executive Director, Nicole Gordon. O’Hare served for three terms—fifteen years. Gordon served for eighteen years. By the time I became the CFB’s second Chair in 2003, it was crystal clear, internally and externally, that the CFB had no partisan agenda.

My third point is a related one. The CFB’s Board and staff are vigorous in policing the requirements of the law. All candidates are audited rigorously. Violations are publicized and punished with fines—and, in some extreme cases, by disgorgement of public funds. Some candidates may be vexed by the vigorous enforcement. But most conclude that forceful enforcement is appropriate. As it surely is. Among other things, vigorous enforcement weakens any public perception that public money is “wasted” on City elections.

Finally, and of great importance, the City system has continued to evolve over time. Indeed, continued improvement is part of the program’s fabric: the law requires the CFB, after each election cycle, to hold public hearings and then issue a written report on suggested improvements. City officials and public interest groups also occasionally suggest improvements.

In my judgment, the most important improvement has been twice lowering the matched amount and increasing the match ratio. Unlike other models that provide candidates with a lump sum grant, the New York City system matches contributions collected by candidates. The program started with a one-to-one match on $1,000 donations. For the 2001 election, this changed to a four-to-one match on $250 donations. Then, for the 2009 election cycle, a six-to-one match on $175 donations was implemented.5

The following Report shows what a dramatic difference this multiple match on small donations has made: it has led to more competition, more small donors, more impact from small contributions, more grass roots campaigning, and more citizen participation in campaigns. All this, while simultaneously reducing the influence of big money in general and corporate money in particular (only donations from living, breathing New Yorkers are matched).

• • • •

In their understandable disgust with large contributions, many reformers missed a big point—and a big opportunity. Political contributions are not inherently tainted. Political contributions do not always raise the specter of corruption. Large ones may. But small financial contributions are a natural part of a healthy participatory democracy. New York’s system should be a model for reform nationwide.

A courageous city can do the same. This aptly describes the potential benefit to the country of New York City’s Campaign Finance Act.

The following Report demonstrates in detail how New York City’s voluntary small-donor matching fund system has benefits beyond simply limiting the size of campaign contributions and expenditures. As I know from first-hand experience, matching small donor donations changes how candidates campaign—in a way that betters democracy. Candidates have a much greater incentive to reach out to ordinary voters, everyday New Yorkers without deep pockets. In turn, being asked to contribute—even small amounts—increases citizen interest and participation in elections.

Based on my personal involvement in the development, defense and implementation of New York City’s matching fund system, I offer a few additional insights.

First, some history. The genesis of reform was a shared conviction that the existing political system was failing and frustrating voters. At the time, in the mid-1980s, the City was shattered by a major corruption scandal. Accompanying the corruption were shockingly large (but legal!) political contributions made to New York City officials under state law. I was then Corporation Counsel for Mayor Edward I. Koch. Koch was himself completely honest, but nonetheless devastated by the scandal and its impact on the City. My advice to the Mayor was to take advantage of the scandal by pressing for governmental reform, including, most importantly, campaign finance reform. To borrow Shakespeare’s words, I urged Mayor Koch to recognize that “sweet are the uses of adversity.”

Mayor Koch did so, and thanks to his efforts, good lawyering by my successor, Peter Zimroth, and the leadership of Peter Vallone, Speaker of the City Council at the time, the landmark City system became law in 1988.

It was passed overwhelmingly in the City Council. It was then enshrined in the City Charter by a very substantial majority voting by referendum—I had the honor to be Co-Chair of the Citizen’s Committee in support.3 Support for the law was bipartisan.

* From 2003 until 2008, Frederick A.O. (“Fritz”) Schwarz, Jr. was Chair of the New York City Campaign Finance Board. Before that, he was the 1988 Co-Chair of the Citizens Committee for support of the City Charter amendment establishing the City’s Campaign Finance Law. As City Corporation Counsel from 1982 through 1986, Mr. Schwarz pushed for radical reform of the City’s campaign finance system. Finally, while in private practice, Mr. Schwarz represented, on a pro bono basis, some forty candidates who intervened against (unsuccessful) efforts to prevent the City from offering a four-to-one match of public funds.

In 1989, at the first election that followed, all three Mayoral candidates, Koch and David Dinkins, both Democrats, and Rudolph Giuliani, a Republican, praised the new system—and participated in it. Since that first election, an overwhelming majority of candidates for all City offices have participated in the program.

Second, a word about the program’s administration. The City Campaign Finance Board (“CFB”) administers the law. A major reason for the CFB’s success is that it has had no partisan divides or partisan stalemates. In this way, the CFB is unlike the Federal Election Commission or the New York State Board of Elections.

In part, the CFB has avoided partisanship because of its appointment structure.4 But far more important have been the traditions established by the first Board members, led by Fordham University President Father Joseph O’Hare as the founding Board chair, and by the first Executive Director, Nicole Gordon. O’Hare served for three terms—fifteen years. Gordon served for eighteen years. By the time I became the CFB’s second Chair in 2003, it was crystal clear, internally and externally, that the CFB had no partisan agenda.

My third point is a related one. The CFB’s Board and staff are vigorous in policing the requirements of the law. All candidates are audited rigorously. Violations are publicized and punished with fines—and, in some extreme cases, by disgorgement of public funds. Some candidates may be vexed by the vigorous enforcement. But most conclude that forceful enforcement is appropriate. As it surely is. Among other things, vigorous enforcement weakens any public perception that public money is “wasted” on City elections.

Finally, and of great importance, the City system has continued to evolve over time. Indeed, continued improvement is part of the program’s fabric: the law requires the CFB, after each election cycle, to hold public hearings and then issue a written report on suggested improvements. City officials and public interest groups also occasionally suggest improvements.

In my judgment, the most important improvement has been twice lowering the matched amount and increasing the match ratio. Unlike other models that provide candidates with a lump sum grant, the New York City system matches contributions collected by candidates. The program started with a one-to-one match on $1,000 donations. For the 2001 election, this changed to a four-to-one match on $250 donations. Then, for the 2009 election cycle, a six-to-one match on $175 donations was implemented.5

The following Report shows what a dramatic difference this multiple match on small donations has made: it has led to more competition, more small donors, more impact from small contributions, more grass roots campaigning, and more citizen participation in campaigns. All this, while simultaneously reducing the influence of big money in general and corporate money in particular (only donations from living, breathing New Yorkers are matched).

• • • •

In their understandable disgust with large contributions, many reformers missed a big point—and a big opportunity. Political contributions are not inherently tainted. Political contributions do not always raise the specter of corruption. Large ones may. But small financial contributions are a natural part of a healthy participatory democracy. New York’s system should be a model for reform nationwide.

About the Authors

Angela Migally serves as Counsel with the Brennan Center’s Democracy Program. As a litigator with the Brennan Center’s Money and Politics project, Ms. Migally defends campaign finance regulations against legal challenge in federal courts throughout the nation. She currently represents good government groups in defending the constitutionality of citizen-financed elections in Arizona, Connecticut and Wisconsin. This coming academic year, Ms. Migally has been selected to teach undergraduates in a course about the U.S. Supreme Court’s treatment of the relationship between Church and State at NYU’s new Abu Dhabi campus. Prior to joining the Brennan Center, Ms. Migally was a civil rights associate with the Law Firm of Omar T. Mohammedi, LLC. She also was a litigation associate at Hughes, Hubbard & Reed, LLP and served as a clerk for the Honorable Walter Herbert Rice of the United States District Court of Southern Ohio. Ms. Migally received her J.D. from the University of Pennsylvania Law School and a B.A. in Economics and Political Science from Oberlin College.

Susan M. Liss is the Director of the Democracy Program, supervising the Center’s work on Voting Rights and Elections, the Right to Vote, Money and Politics, Fair and Independent Courts, Census and Redistricting, and New York State Government Accountability. In her 30-plus year legal career, Ms. Liss has worked for a number of constitutional, civil rights and women’s organizations. During the Clinton-Gore administration, she served at the Department of Justice as Deputy Assistant Attorney General for Policy Development and as Chief of Staff and Counselor in the Civil Rights Division. She also served as Chief of Staff to Mrs. Gore and Special Counsel to the Vice President. Prior to joining the Brennan Center, she was the Director of Federal Relations for the Commonwealth of Massachusetts. She is an honors graduate of the University of Michigan and Georgetown University Law Center, and a member of the Bar of the District of Columbia.

Frederick A.O. Schwarz, Jr. is Chief Counsel of the Brennan Center, which he joined full time in 2002. Since graduation from law school in 1960, Mr. Schwarz has had an uncommon career, mixing the highest level of private practice with a series of critically important public service assignments. Mr. Schwarz’s private practice was at Cravath, Swaine & Moore, where he was a litigation partner with a broad and varied practice. From 1975-76 Mr. Schwarz was Chief Counsel to the Church Committee and was New York City Corporation Counsel under Mayor Edward I. Koch (1982-86). Then in 1989, he chaired the Commission that extensively revised New York City’s Charter, and from 2003-08 he chaired the New York City Campaign Finance Board. He currently chairs the board of Atlantic Philanthropies. For almost twenty years, he served as Chair of the boards of both NRDC and the Vera Institute of Justice, on whose boards he continues to serve. He also chaired the board of the Fund for the City of New York. At the Brennan Center, he has tried three cases, testified frequently before Congress, edited various reports, and written substantially. Mr. Schwarz received an A.B. magna cum laude from Harvard College in 1957 and a J.D. magna cum laude from Harvard Law School in 1960

Acknowledgements

Many people had a hand in this report. Special thanks to Brennan Center colleagues Monica Youn, Ciara Torres-Spelliscy, Mimi Marziani, Kelly Williams, Ali Hassan, and Jafreen Uddin for their assistance in turning the idea of this report into reality. Thanks as well to Elizabeth Daniel, who assisted with interviews of New York City elected officials, to legal interns Leah Morfin, Nicolas Riley, Dave Rochelson, Matt Robinson, and Jenny Shen, and to undergraduate intern Hannah Kieschnick. Thanks also to Joseph Ferris, Eric Friedman, and the Campaign Finance Board for their assistance with data analysis.

The authors are especially grateful to Fritz Schwarz, whose wisdom and expertise helped guide this study. Michael Waldman, who has committed much of his career to campaign finance reform, made invaluable contributions at each stage of this report. The authors are indebted to him for his command of these issues and his overall vision to put voters back at the center of our democracy.

The Brennan Center is grateful to Democracy Alliance Partners, the Ford Foundation, the Open Society Institute, Rockefeller Brothers Fund, Deborah and Louis Salkind, and the Wallace Global Fund for their generous support.